Item 1.01 Entry into a Material Definitive Agreement
The information set forth in Item 5.02 of this Current Report on Form 8-K under
the headings "Appointment of Additional Independent Directors; Formation of
Board Committees" and "Appointment of Chief Restructuring Officer" is hereby
incorporated by reference in this Item 1.01.
Item 5.02 Departure of Directors or Certain Officers; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
Appointment of Additional Independent Directors; Formation of Board Committees
On June 20, 2022, the Board of Directors (the "Board") of GWG Holdings, Inc.
(the "Company") duly appointed two new independent directors to the Board,
Anthony R. Horton and Jeffrey S. Stein, in accordance with the Company's Amended
and Restated Bylaws. Each of Mr. Horton and Mr. Stein have substantial
experience serving as directors of entities that are in proceedings under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"), such
as the voluntary cases (the "Chapter 11 Cases") filed by the Company and certain
of its subsidiaries (the "Debtors") in the United States Bankruptcy Court for
the Southern District of Texas (the "Bankruptcy Court"). Mr. Horton was
appointed to serve as a Class III director and Mr. Stein was appointed to serve
as a Class I director. There are no arrangements or understandings between
either Mr. Horton or Mr. Stein and any other person pursuant to which they were
appointed to the Board, other than the agreements between the Company and
Messrs. Horton and Stein described in this Current Report on Form 8-K. Neither
Mr. Horton nor Mr. Stein has any direct or indirect material interest in any
transaction required to be disclosed pursuant to Item 404(a) of SEC Regulation
S-K.
In connection with their appointment to the Board, each of Messrs. Horton and
Stein entered into an Independent Director Agreement with the Company. The
Independent Director Agreements have a term expiring upon the earlier of (i) the
effective date of a plan of reorganization for the Debtors pursuant to the
Bankruptcy Code that has been filed and confirmed with the Bankruptcy Court and
(ii) the dismissal of the Chapter 11 Cases (the "Expiration Date"). Messrs.
Horton and Stein shall be entitled to cash payments of $35,000 per month during
the term of their respective Independent Director Agreement, prorated for
partial month service; provided, that each of Messrs. Horton and Stein shall be
entitled to a minimum of $210,000 in aggregate fees from the Company during the
term of their respective Independent Director Agreement; and provided further,
that Mr. Stein shall not be entitled to compensation for service as an
independent director while he is serving as Chief Restructuring Officer of the
Company, as described below. Messrs. Horton and Stein are also entitled to
reimbursement for reasonable business related expenses incurred in good faith in
the performance of their duties for the Company.
The Independent Director Agreements include indemnification, contribution and
expense advancement provisions that are customary for agreements of this nature.
The indemnification, contribution and expense advancement benefits provided
under the Independent Director Agreements are in addition to the indemnification
and expense advancement provisions provided for in the Company's Certificate of
Incorporation and Amended and Restated Bylaws. The foregoing description of the
Independent Director Agreements is qualified in its entirety by the terms of
such agreements, which are filed as exhibits to this Current Report on Form 8-K
and incorporated herein by reference.
In connection with their appointment as independent directors, Messrs. Horton
and Stein each were appointed to two newly created committees of the Board, the
Investigations Committee and the Special Committee. David F. Chavenson, an
existing independent director, was also appointed to the Special Committee.
The Investigations Committee has the exclusive authority of the Board to (i)
investigate any transaction, group of related transactions or other relationship
(each a "Transaction") between the Company or any of its subsidiaries and any
third party that occurred at any point prior to the filing of the Chapter 11
Cases; (ii) prepare a report regarding the results of its investigation to be
provided to the full Board, including its conclusions regarding whether any
potential claims or causes of action should be brought regarding any
Transaction; (iii) engage advisors, including outside legal counsel selected by
the Investigations Committee, to assist the Investigations Committee in
discharging its duties; and (iv) bring any claims or causes of action regarding
any Transaction described in its report with outside legal counsel engaged by
the Investigations Committee.
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The Special Committee has the exclusive authority of the Board to (i) adopt any
new compensation arrangements for officers of the Company in connection with the
Chapter 11 Cases (a "Key Employee Plan"); (ii) evaluate the terms and conditions
of the Shared Services Agreement, dated as of May 27, 2020 and effective as of
January 1, 2020, between the Company and The Beneficient Company Group, L.P.
(together with its subsidiaries, "Ben") (the "Shared Services Agreement"), and
the performance by the Company and Ben thereunder, relating to the period
following the commencement of the Chapter 11 Cases, and any actions that may or
should be taken by the Company with respect to the amendment or termination of
the Shared Services Agreement and, with legal counsel engaged by the Company,
the assertion of any claim or cause of action thereunder, and to prosecute and
settle any such claim or cause of action; (iii) evaluate the terms and
conditions of any transaction between the Company or any of its subsidiaries and
any officer or director of the Company (other than the Independent Director
Agreements of the Consulting Agreement (as defined below)) that presents an
actual or potential conflict of interest between the Company and such officer or
director (a "Potential Conflict Transaction"); and (iv) exercise general
oversight of all proceedings and activities of the Company related to any Key
Employee Plan, the Shared Services Agreement and any Potential Conflict
Transaction.
The Special Committee also has the authority to (the following being referred to
as the "Special Committee Chapter 11 Actions") (i) evaluate the terms and
conditions of (a) any debt financing proposal to be submitted to the Bankruptcy
Court for approval in connection with the Chapter 11 Cases, or (b) the sale of
all or a portion of the Company's and its subsidiaries' portfolio of life
insurance policies or the sale of any of its other assets, including a sale of
all or substantially all of the Company's interests in Ben; and (ii) evaluate
the terms and conditions of any plan of reorganization to be submitted by the
Debtors to the Bankruptcy Court for confirmation. Any action by the Board to
approve any agreement or instrument effecting any Special Committee Chapter 11
Action shall require that the Special Committee, by unanimous vote of all of its
members, shall not have objected to any such agreement or instrument. The
Special Committee also shall have the authority to evaluate the terms and
conditions of any proposed transaction by Ben or FOXO Technologies, Inc. to
become a public company by merger with a special acquisition corporation and
report its findings, including any recommendation, to the Board.
Resignation of Peter T. Cangany, Jr.
Immediately prior to the appointment of Messrs. Horton and Stein as independent
directors of the Board on June 20, 2022, Peter T. Cangany, Jr. resigned as a
director of the Company. Mr. Cangany informed the Board that his resignation was
to address any perceived conflicts by his service on the Board and his service
on the board of directors of the general partner of Ben. The Company believes
that eliminating any perceived conflicts will assist Ben in continuing to
implement its business plan, thereby enhancing the value of the Company's
investments in Ben. The resignation of Mr. Cangany was not due to any
disagreement with the Company known to an executive officer of the Company on
any matter relating to the operations, policies or practices of the Company.
Appointment of Chief Restructuring Officer
On June 20, 2022, the Board also appointed Mr. Stein, age 52, as the Company's
Chief Restructuring Officer, to report to the Board and Murray T. Holland,
Chairman, President and Chief Executive Officer of the Company. In connection
with the appointment of Mr. Stein as the Chief Restructuring Officer, the
Company and Mr. Stein entered into a Consulting Agreement, dated as of June 1,
2022 (the "Consulting Agreement"). The Consulting Agreement may be terminated by
either party upon 30 days' prior written notice.
Mr. Stein is Founder and Managing Partner of Stein & Holly Inc., a financial
advisory firm that provides consulting services to public and private companies
and institutional investors. Previously, Mr. Stein was a Co-Founder and
Principal of Durham Asset Management LLC, a global event-driven distressed debt
and special situations equity asset management firm. From January 2003 through
December 2009, Mr. Stein served as Co-Director of Research at Durham responsible
for the identification, evaluation and management of investments for the various
Durham portfolios. From July 1997 to December 2002, Mr. Stein served as
Co-Director of Research at The Delaware Bay Company, Inc., a boutique research
and investment banking firm focused on the distressed debt and special
situations equity asset classes. From September 1991 to August 1995, Mr. Stein
was an Associate and Assistant Vice President at Shearson Lehman Brothers in the
Capital Preservation& Restructuring Group. Mr. Stein currently serves as a
director on the board of Ambac Financial Group, Inc., where he serves as
Chairman, and as a board observer on the board of TORM plc. Mr. Stein previously
served as a director on the boards of Intelsat Connect Finance S.A., NMC Health
plc, Westmoreland Coal Company and Dynegy Inc. Mr. Stein received a B.A. in
Economics from Brandeis University and an M.B.A. with Honors in Finance and
Accounting from New York University.
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Pursuant to the terms of the Consulting Agreement, Mr. Stein, in his capacity as
Chief Restructuring Officer, has been engaged to, among other things, (i) review
the financial and operational details of the Company to be able to assist in the
formulation of a restructuring plan; (ii) assist in formulating and developing
with the Board the Company's refinancing/restructuring options that are intended
to be value accretive to the Company and maximize the value of the Company's
assets for the benefit of the Company's stakeholders; (iii) assess options to
optimize the Company's capital structure; (iv) manage and implement the
restructuring plan(s) of the Company and its subsidiaries; (v) explore, assess,
and recommend asset acquisition(s), disposition(s), merger(s) or other strategic
transaction(s); (vi) upon consultation with and approval of the Board or of the
applicable committee of the Board, as the case may be, communicate and/or
negotiate with outside constituents, including, but not limited to, the Official
Bondholders Committee and lenders to the Company's subsidiaries; (vii) review
and analyze any revised business plan(s), including financial and operating
budgets, provided by Company management and the Company's advisors; (viii)
assess employee compensation matters, including the development and
implementation of any key employee incentive or retention program(s); and (ix)
review the Company's business reporting systems and recommend changes, if
appropriate, to improve effectiveness.
During the term of the Consulting Agreement, Mr. Stein will receive a monthly
consulting fee of $100,000, which shall be prorated for partial months;
provided, however, that Mr. Stein shall be entitled to receive a minimum of
$600,000 in aggregate consulting fees pursuant to the Consulting Agreement. In
addition, Mr. Stein will be entitled to a success bonus of $1,250,000 upon the
completion of any "Success Event," which is the confirmation of a Chapter 11
plan of reorganization pursuant to section 1129 of the Bankruptcy Code, or a
sale pursuant to Section 363 of the Bankruptcy Code, that involves substantially
all of the assets of the Company and its subsidiaries and restructures or
otherwise resolves all or substantially all of the indebtedness of the Company
and its subsidiaries or otherwise restructures or changes the ownership of the
Company. Mr. Stein is also entitled to reimbursement for reasonable business
expenses necessary or appropriate to carry out his duties as Chief Restructuring
Officer. As disclosed above, Mr. Stein will not be entitled to any fees for
serving as a director of the Company while he is serving as Chief Restructuring
Officer. In addition, Mr. Stein is not eligible to participate in any health,
welfare, retirement, or other benefit plans or policies offered by the Company
to its employees.
The foregoing description of the Consulting Agreement is qualified in its
entirety by the terms of such agreement, which is filed as an exhibit to this
Current Report on Form 8-K and incorporated herein by reference.
Bankruptcy Court Approval
While Mr. Horton and Mr. Stein have been duly appointed as directors of the
Company as of June 20, 2022, the compensation and other terms of the engagements
of Messrs. Horton and Stein are subject to approval by the Bankruptcy Court.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
10.1 Independent Director Agreement, dated June 2, 2022, between Anthony R.
Horton and the Company
10.2 Independent Director Agreement, dated June 14, 2022, between Jeffrey
S. Stein and the Company
10.3 Consulting Agreement, dated as of June 1, 2022, between the Company
and Jeffrey S. Stein
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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